Indonesia’s economy in the next six months will be supported by strong consumption and more investment, acting Coordinating Minister for the Economy Sri Mulyani Indrawati says.
“Investment is forecast to recover in the second and third quarters, along with increasing confidence as seen from the (recent) rise in market capitalization,” Mulyani said Monday.
She also said banks might start channeling more loans due to the recent cuts in the central bank’s benchmark interest rate.
The Bank Indonesia (BI) rate now stands at 7 percent and may prompt banks to start lending instead of putting money in BI certificates and government bonds.
Also, the government has started to invest in agreed infrastructure projects, as part of its economic stimulus package.
“Government investment in the form of capital spending is mate-rializing in the second and third quarters, in [the form of] stimulus or other forms of spending,” she said.
BI deputy governor Hartadi A. Sarwono said Indonesia’s economic growth in the second quarter and beyond would be supported by stronger export demand, including from Japan, India, China and South Korea.
With private consumption still going strong, which accounts for about 60 percent of the economy, ahead of the presidential election in July and the fasting month in August, the economy is forecast to expand “at close to 4 percent”, said Mulyani.
So far, Indonesia has cushioned itself relatively well from the impacts of the global economic downturn.
The country still managed to score positive growth, just below that of China and India, while other countries plunged into recession.
The International Monetary Fund (IMF) last week revised its 2009 growth forecast for Indonesia from 2.5 percent to between 3 percent and 4 percent.
The government expects the economy to expand between 4 percent and 4.5 percent this year, while BI forecasts a growth of between 3 percent and 4 percent.
“IMF made a wrong forecast on our economy. They overestimated the impacts of the global downturn on Indonesia,” said Mulyani.
Destry Damayanti, the chief economist of Mandiri Sekuritas, had a different opinion, saying investors who wanted to make direct investment may take a wait-and-see position before the president is elected.
“They wait for certainty as the leader will determine the economic policies. Investment may [therefore]start to strengthen in the end of third quarter,” she said.
But portfolio investment will strengthen as indicated by the recent capital inflows, she said. Indonesia has become an attractive destination for short-term investors due to high yields and the perception of improved risk.
Destry added that exports would strengthen as demand strengthened and commodity prices increased.
“There is an increase in export demand from Asian countries, like China. The rise in commodity prices also helps, commodities a count for about 40 percent of our exports.”
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